From cash to e-wallet; How Indians spend their money

Paytm hai kya? It’s a question we are all too familiar with by now. Rewind a few years back and the idea of a mobile wallet was somewhat hard to accept, especially in a cash-loving country like ours. But as they say, the times, they are a changing.

Within the last couple of years, India has emerged as a digital payment powerhouse. But this journey has been an unlikely one. While the west was naturally transitioning towards digital payments, it took one drastic step for the country to suddenly shift gear towards it. Demonetization knocked us down hard but also propelled us towards digital transformation, in turn giving a massive boost to the mobile wallet industry.

The e-wallet industry today is on a roll despite cash being back in the flow. The fact that India still has a vast non-banking population but a rapidly growing smartphone market gives them the perfect conditions to set up shop.

Though almost a decade old, early entrants like Paytm and Mobikwik were the first ones to make a windfall especially post demonetization. What helped them the most was their diversified business model. Their roaring success has encouraged others to join the fray. From banking institutions, telecom and e-commerce giants to communication apps like Hike and Truecaller, everyone today is fighting for a share of the pie. Even Whatsapp is currently testing its payment service in India and is expected to play a major disruptor once it formally launches.

Despite the stiff competition, Paytm continues to grab a major share of the market as revealed by the Piplsay survey

The company which started out in 2009 as a mobile recharge and bill payment platform today has over 250 million registered users and has almost become synonymous with mobile wallets. But its the emergence of new entrants like Flipkart owned Phonepe and Google pay that will change market dynamics in times to come. Caught in a rat race, wallet companies are dishing out huge discounts, cash-backs, freebies to woo customers. Amazon Pay which opened up its wallet last year rolled out a promotional offer of 10% cashback even on returned items in a bid to grab attention.

So with such rising popularity, how are people using their mobile wallets? A peek into the 35000 responses we received gives us a good insight

An impressive 7 out of 10 people surveyed use their mobile wallets quite regularly, with those in the age group of 25-34 leading this count

Reasons for not using mobile wallets generally range from unfamiliarity with technology and preference for cash to serious concerns of data privacy and fraud. However, when it comes to payments, a majority of Piplsay respondents seem to be more comfortable making smaller payments like shopping and bills as opposed to big products or flight tickets.

The huge reliance on mobile wallets can also be gauged from the fact that a whopping 86% respondents seem comfortable doing their banking transactions on these apps. Diversifying into a payment bank, either on its own or through partnerships has been a big step up for wallet players, helping them act as legitimate banking platforms with their range of financial services offerings.

Though e-wallets were very much in use even before demonetization as clearly shown by the Piplsay survey, the non-availability of cash post the announcement forced people to go digital in droves. Payments using mobile wallets almost doubled in the next one-year, clocking $1 billion per month in 2017.

That mobile wallets are majorly used for online transactions shows that cash is still the king for most offline payments

Though the mobile wallet industry has seen unprecedented growth in the last couple of years, it is still in its nascent stage. The large untapped market presents huge opportunities for them to grow. Increasing internet and smartphone penetration in rural India, in particular, will help bring millions of people into this cash-free revolution.

Digital payments in India are expected to grow five-fold to $1 trillion by 2023 with mobile wallets playing the lead role. The scope is simply tremendous and with global giants weighing in, the race to ace the game has only just begun.